By Brazil Stock Guide – TOTVS (B3: TOTS3) has placed artificial intelligence (AI) at the heart of its corporate strategy. During the company’s 3Q25 earnings call, CEO Dennis Herszkowicz described AI as a structural driver of transformation — one capable of changing how the company builds software, serves clients, and generates revenue. “AI is not a bubble. It’s here to stay. It’s a horizontal technology that will impact everything: our costs, our products, and the way we operate,” he said.
Two fronts: internal efficiency and new revenue
According to Herszkowicz, TOTVS is pursuing AI on two simultaneous fronts. The first is internal, focused on productivity gains through automation and machine learning applied to back-office and software development processes. The second is external and commercial, with AI embedded in the company’s ERP and cloud platforms through intelligent agents that support analytical tasks and automated decisions. “These agents have already started generating revenue and will multiply over the coming quarters,” he said.
A custom-built AI infrastructure
The company is also building what Herszkowicz calls “the largest AI logical infrastructure in Brazil.” The project includes an agnostic AI layer capable of integrating multiple models — from proprietary tools to global systems such as OpenAI and Anthropic — a native agent builder available to partners, and a restructured API architecture designed to support new monetization models based on usage and performance. “It’s a silent investment that doesn’t show from the outside but will underpin TOTVS’s growth in the coming years,” said the CEO.
Growing weight in revenue
Although the company has not yet disclosed detailed figures, Herszkowicz said AI will represent a growing and relevant share of revenue starting in 2026. Some of that will come from new products, while the rest will stem from features embedded into existing software. “It might not even be possible to separate what counts as AI revenue. When we add intelligent elements into our ERP, it simply becomes part of the product,” he explained.
Through this approach, TOTVS aims to accelerate its evolution from a traditional ERP vendor into an integrated digital business platform, with artificial intelligence as the invisible — and increasingly profitable — engine of its operations.
A quarter of expansion and profitability
The third quarter was marked by operational gains across all business units. Recurring revenue continued to grow, supported by a gross margin near 80%, reflecting the company’s improved scale and efficiency. Herszkowicz said the performance indicates a return to “normal dynamics” after the period of mismatch between IPCA and IGP-M inflation indexes that had pressured margins in 2022 and 2023.
The company also continued to integrate acquisitions, particularly through Dimensa, its financial software arm. CFO Victor Maia highlighted consistent margin recovery driven by acquisitions such as Quiver and Ager. “There’s no structural reason preventing these businesses from reaching the same margins as the more mature ones. It’s only a matter of time and scale,” he said.
Techfin: ERP Banking gains traction
The Techfin unit, created in partnership with Itaú, continues to expand rapidly. Adjusted net income reached R$16 million, up 72% from a year earlier, with a 30% increase in net funding revenue. Herszkowicz said the ERP Banking model — which integrates financial services into business management software — “has been proven,” using ERP data to refine credit scoring, expand limits, and reduce default rates.
For 2026, TOTVS plans to launch new credit products and cash management solutions, including a digital corporate account, to deepen customer relationships. “The market is huge, and the model is disruptive. We’re still far from reaching our full potential,” the CEO said.
RD Station: accounting changes, acceleration, and criticism
At the marketing automation unit RD Station, TOTVS introduced new accounting criteria separating SaaS from transactional revenues, making the business more predictable and profitable. According to Herszkowicz, the shift is already paying off: annual recurring revenue (ARR) rose 47% year-over-year.
The CEO, however, took the opportunity to criticize some analysts who failed to update their models to reflect the changes. “We did the work and published the adjusted figures in our earnings release, but we still saw reports with a 5% to 7% revenue gap that isn’t real,” he said. Herszkowicz publicly thanked Goldman Sachs, JP Morgan, Itaú, Safra, and XP for their accurate adjustments, while giving what he called a “wake-up call” to the rest. “It bothers me. We strive for transparency and clarity, and we expect the same analytical rigor in return,” he added.
Despite the criticism, his tone was confident. “These changes are positive and already showing acceleration. 2026 should be a very strong year for RD,” Herszkowicz said.
Outlook for 2026
Closing the call, the CEO said the company’s strong recurring revenue additions and the solid performance of all business units already set a promising tone for 2026. “Next year is being built on the foundations of this excellent 2025,” he said.
With steady growth in software, Techfin, and marketing, and AI as a unifying pillar of innovation, TOTVS is reinforcing its transformation into a comprehensive technology and business platform, placing artificial intelligence at the core of its next growth cycle.
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